Amazon Consolidating A Decline Below Its 200-Day Moving Average. Here’s How To Trade The Stock Now.
(Photo by Smith Collection/Gado)
Amazon.com (AMZN) gapped below its 50-day and 200-day simple moving averages on January 4. The low of $3,126 set on January 10 is 16.9% below the November 19 high of $3,762. This is a double-top with the prior high of $3,773 set on July 13, 2021.
Some Wall Street analysts question Amazon’s $19 billion annual spend on engineering. This concern keeps the stock price behind rivals Alphabet, Apple
Amazon.com is not cheap. Its p/e ratio is 63.18% and the company does not pay a dividend, according to Macrotrends. Amazon had beaten earnings-per-share estimates in five consecutive quarters. This streak ended with its earnings report released on October 20 when it matched expectations.
The Daily Chart for Amazon.com
Daily Chart for Amazon.com. Courtesy of Refinitiv Xenith.
The daily chart for Amazon shows a trading range over the last 52 weeks. The low end of the range is $2,881 set on March 5, 2021. The high end of the range is $3,773 set on July 13, 2021. This was a gain of 30.9%. This wide range is being consolidated. The huge price gap lower on July 30 was caused by a negative reaction to earnings released after the closing bell on July 29.
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Note that since this price gap the stock traded back and forth around its 50-day and 200-day simple moving averages, now at $3,441 and $3,394. Amazon closed below these moving averages on January 4, 2022. At the January 10 low of $3,126 the stock was below it monthly and annual pivots at $3,264 and $3,196, respectively, which are the two horizontal lines. Shares of Amazon are trading between these lines at $3,248 this afternoon.
The Weekly Chart for Amazon.com
Weekly Chart for Amazon.com. Courtesy of Refinitiv Xenith.
The weekly chart for Amazon is negative the stock below its five-week modified moving average at $3,358. The stock is well above its 200-week simple moving average or reversion to the mean at $2,421. The horizontal line at the top of this chart is the semiannual risky level at $3,867. The 12x3x3 weekly slow stochastic reading is declining at 28.44.
Trading Strategy: Buy shares of Amazon on weakness to its annual pivot at $3,196. Reduce holdings on strength to its 200-day simple moving average at $3,394.
